HFZ Capital Group seems to have a million problems. With the once prolific developer battling lawsuits and contractors’ liens as it clings to its Manhattan condo buildings, its travails seem fit for an HBO drama.
But the latest episode is more like a plot from A&E’s “Storage Wars.”
A storage company tried to auction off two HFZ tenants’ storage units, which include sports memorabilia and antiques, after HFZ fell behind on its payments. At one point an HFZ representative even went to a planned auction to bid, only to be accused of trespassing by the storage company, according to a complaint filed by HFZ.
A New York Supreme Court judge has temporarily stopped the sale, according to documents HFZ’s legal team provided to The Real Deal.
“HFZ is committed to protecting the rights of its tenants and will continue to prosecute this case to ensure that these innocent parties are made whole,” said Christopher Milito of Morrison Cohen, who is representing HFZ Capital.
The strange twist in HFZ’s struggles centers around whether the development firm paid Scanio Moving and Storage rent for 11 storage units used by the real estate firm and two of its tenants.
The saga began when HFZ acquired two rental buildings in hopes of converting them to luxury condo projects called The Astor, at 235 West 75th Street, and The Chatsworth, at 344 West 72nd Street. To spare two tenants from the construction, it agreed to move them to other HFZ-owned apartments and to store their stuff.
But HFZ’s “business soured,” according to its lawsuit, and it was unable to make payments on its own storage units. Still, the company insists, it kept current on the tenants’ units.
According to HFZ, however, Scanio instead spread the payments across all the units. The developer then sought to redeem the tenants’ units, but Scanio rejected that, the complaint alleges.
Scanio set the auction reserve for the two tenants’ units at a combined $80,000, when HFZ’s outstanding balance for all 11 units was $83,000, HFZ’s lawyer claims.
Scanio “is using the tenants’ personal possessions as pawns in his efforts to extract payment on the HFZ units,” HFZ’s suit argues.
Scanio’s lawyer declined to comment and its president, Nir Scanio, did not return a request for comment.
In an email to HFZ’s lawyer in early February, Nir Scanio makes clear that he was annoyed by HFZ’s missed payments. Scanio said HFZ has been avoiding paying since 2016.
“Scanio storage is not a dumping/disposal company,” he wrote in the email. “HFZ has known about the auction for months as well as the amount that needs to be paid to avoid the sale but has refused to pay their open balance.”
HFZ Capital pins some of the blame on a former employee, Nir Meir, saying he was in charge of handling the storage bills and was “not punctual in paying Scanio’s invoices.”
The company alleges that it had a much better picture of the situation once it terminated Meir in December.
Meir’s spokespeople did not immediately respond to a request for comment. Crain’s first reported news of the lawsuit.
In a final bit of irony, while fighting to reclaim the contents of the storage units, HFZ lost control of one of the buildings in the case. Its lender, Los Angeles-based CIM Group, foreclosed last month on the junior mezzanine positions tied to The Astor and three other Manhattan properties.